Prices in the US fell in the year to April at the fastest annual rate since 1955, labour department figures showed on Friday, as declining energy prices pulled back the cost of living.

Now, of course, common sense tells us that declining prices are a good thing, but not to the Fed, no, no, no. In fact the only good thing in a depression, for the average consumer, is lower prices. The government will of course move to halt this trend, just as they're trying to in the housing market.

Separately on Friday official figures showed that US industrial output slid again in April, but at a more modest pace than in prior months, and consumer confidence rose in May to the highest level seen since before the collapse of Lehman Brothers last September.

Consumer prices fell by 0.7 per cent over the year to April and were flat from March due to sagging prices of petrol, electricity and food. Slumping prices have lessened pressure on consumers who have seen their wealth and employment savaged by the recession.

But core prices, which exclude food and energy and are the measure by which economists judge the risk of general deflation, rose by 0.3 per cent from March and were 1.9 per cent higher than in April 2008. More than 40 per cent of the monthly increase, however, was due to a 9.3 per cent jump in the price of tobacco which has been driven by a government tax that recently took effect.

Hong Kong’s economy contracted at the fastest rate since the Asian financial crisis in the first three months of this year as exports passing through the territory saw their biggest drop in more than half a century.

The government on Friday predicted gross domestic product would contract by up to 6.5 per cent this year, after announcing the economy had shrunk at an annual rate of 4.3 per cent in the first quarter of 2009.

he recession in the eurozone intensified markedly in the first quarter, dragged down by an almost 4 per cent contraction in the German economy.

Gross domestic product in the 16-country region fell by a much larger-than-expected 2.5 per cent in the period – outpacing the US slowdown – according to official data released on Friday. The contraction deepened what was already the worst recession in continental Europe since the second world war. The final quarter of 2008 had seen a 1.6 per cent fall in GDP.

The declaration was made as it emerged that Europe's biggest economy has now suffered a worse "lost decade" than Japan and is deeper in recession than any other major economy.

On a day of dismal news for the European economy, official figures also showed that Italy, Austria, Spain and the Netherlands are facing their biggest combined slump in post-war history, sparking warnings about the potential for social unrest throughout Europe.

Within hours, the managing director of the International Monetary Fund (IMF) warned that the global recession is far from over and that people must prepare themselves for more financial shocks. Dominique Strauss-Kahn said the world remains in the grips of a "Great Recession" and played down talk of "green shoots".